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NPA resolution: the details that matter

Caught up with Andy Mukherjee’s Bloomberg Gadfly columns, as I always do, from time to time. As always again, he has something that is important and that is often overlooked by others. This blog post is dedicated to three of his recent columns surrounding the issue of non-performing assets in the Indian banking system.

As of last month, the National Company Law Tribunal was looking for four judges and 12 technical members, all of whom are required to be at least 50 years old with 10 years of legal or 15 years of accounting practice behind them. Five years spent adjudicating labor disputes is also acceptable.

In a footnote, Andy Mukherjee adds, Hopefully, the 65 vacancies the company law tribunal advertised a month earlier — for court officers to typists — have been filled, and the court’s headquarters in New Delhi has selected its tech support vendor for the phone lines. [Link]

This is par for the course with information efficiency of markets, of course:

At the end of 2015, when concerns over Indian lenders’ balance sheets reigned supreme, ICICI Bank Ltd. had around 214 billion rupees ($3.33 billion) in gross nonperforming assets. The bank announced a 78 percent jump in NPAs for just the first three months of 2016, and shell-shocked investors pushed the stock down almost 10 percent in three days.

That was last May. Fast-forward a year, and investors rewarded ICICI Bank’s freshly revealed bad-loan pile of 425 billion rupees — twice as large as the end-2015 stock — by pushing the shares up as much as 9 percent Thursday. [Link]

This is sad and must count as one of the most important collateral damage of the demonetisation drive. But, the benefits are yet to be counted and, one hopes, that someone is working on making the benefits happen. Or, too fond hopes?

What monoline lenders lack in deposit muscle, they make up for in their superior knowledge of borrowers and risk management. It’s a shame that policy whimsy and cynical politics mean the specialists can’t survive except as part of conventional banks. [Link]

One thought on “NPA resolution: the details that matter”

Good luck! Institutional capacity to make decisions is very limited and takes so long. While intention is good, it just gets bogged down as vast majority are clueless. I am speaking from a bit of experience. And no, we are not near the bottom yet. We are years away at this pace.